Recently the Court of Appeal has given judgment in favour of L'Oreal against imitator Bellure following on from the judgment in the same case given by the European Court.
Bellure and others produced smell-alike perfumes, which imitated famous brands but without the price tag. As a part of the sale of these products, comparison lists were used to tell customers and consumers that, for instance, Perfume A smelt like Trésor. L’Oreal and other trade mark owners objected to the use of their trade marks in this manner, which it suggested is free-riding and takes advantage of the reputation that it has built up in its product to sell another product.
Essential functions of a trade mark
European law provides that where an identical mark to the registered trade mark is used in the course of trade without the brand owners consent, this will be trade mark infringement unless it can be shown that the use is purely descriptive or does not affect the essential functions of the trade mark.
Previously, “essential function” has been interpreted as a trade mark’s central job, which is to say to the consumer, “I made this, and because I made this you can rely on it being of a certain quality”. Had this been the end of it, Bellure would have succeeded as a comparison list in no way communicates that the smell-alike is the real product, the consumer knows that they are buying a cheap imitation. However, the European Court in its Judgment extended this to also incorporate situations where the functions of communication, investment or advertising are liable to be affected.
As L’Oreal has unquestionably invested heavily in the creation and promotion of its trade marks it met this criteria. It is likely that most trade mark owners will also do so. Therefore, the Court of Appeal was forced to conclude that comparison lists constitute trade mark infringement.
Equally, there was no safe harbour under the Comparative Advertising Directive, which provides that goods presented as imitations or replicas or advertising that take unfair advantage of the reputation of a trade mark will not be able to benefit from its protection.
A further development was the idea that even where there is no confusion, use of the trade mark can still amount to free riding and taking unfair advantage of the distinctive character or repute of the trade mark.
Within other European jurisdictions the action of unfair competition is available to a brand owner. When first looking at L’Oreal v Bellure the Court had been very firm that a new tort of unfair competition should not become part of English law.
While the English action of passing off could be considered a cousin of unfair competition, the key distinguishing factor is the need for a misrepresentation, which is expressed through customer confusion, as to whether the goods come from the brand owner or are in someway endorsed by the brand owner. Where a producer is saying to a consumer “I’m like Brand X – but I’m cheaper”, passing off is very unlikely to arise. Equally, passing off is married to the point of sale, whereas trade mark infringement is not.
It is clear that the Court of Appeal considers that the European Court has taken it where it did not want to go, however EU trade mark law is currently being reviewed by the European Commission. The English Judges have made no secret of the fact that they think it should wind matters back a bit to ensure that the balance between competition and the monopoly enjoyed by a brand is even. The study must be completed by the end of this year so it may be that it will be all change in 2011.